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Business Tesla's dirty little secret: Its net profit doesn't come from selling cars

OnionSnake

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Eleven states require automakers sell a certain percentage of zero-emissions vehicles by 2025. If they can't, the automakers have to buy regulatory credits from another automaker that meets those requirements -- such as Tesla, which exclusively sells electric cars.
It's a lucrative business for Tesla -- bringing in $3.3 billion over the course of the last five years, nearly half of that in 2020 alone. The $1.6 billion in regulatory credits it received last year far outweighed Tesla's net income of $721 million -- meaning Tesla would have otherwise posted a net loss in 2020.
"These guys are losing money selling cars. They're making money selling credits. And the credits are going away," said Gordon Johnson of GLJ Research and one of the biggest bears on Tesla (TSLA) shares.
While Tesla is the leading maker of electric cars, it faces increased competition as virtually every automaker rolls out their own EVs, or plan to do so. Volkswagen has passed Tesla in terms of EV sales in most of Europe. GM said last week it hopes to shift completely to emissions-free cars by 2035.
"The competition is rendering Tesla's cars irrelevant," said GLJ' Resarch's Johnson. "We do not see this as a sustainable business model."
What Tesla has that other automakers don't is rapid growth -- last week it forecast annual sales growth of 50% in coming years, and it expects to do even better than that in 2021 as other automakers struggle to get back to pre-pandemic sales levels.


There's more in the article, but I'm surprised that Tesla really is only profitable because of the regulatory credit system. And I'm very curious as they continue to grow, what is the path forward as a company when VW, GM, etc seem to be coming for their lunch with higher quality production lines, much more established logistics systems and most importantly the dealership network access.
 

*Nightwing

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Sep 24, 2014
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Nope
So what?

You mean sorta like securities and exchanges are supposed to have their value based on their actual real value but in reality are traded based upon their future speculative pricing? Its how the world works, businesses are going to exploit every venue for profit just like Apple, Google, Facebook, Amazon, and every other company.
 
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Business

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Nov 12, 2010
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What year is it? The "you just wait until the big legacy automakers come to market" FUD should be long debunked. At this point, VW will be lucky if they don't have to end up licensing Tesla's autonomous driving and battery tech.
 

Atrus

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Jul 16, 2007
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This is neither dirty or much of a secret since its mentioned every quarter Tesla posts a profit. Just Google it and you'll find that this is old news. Tesla was first not profitable at all and then moved toward profitability with credits and is now working to profitability without credits.

They've got a lot on their plate with new batteries and cheaper cars but I'm pretty sure businesses are aware of the "make more profit" goal.
 
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RoboFu

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Oct 10, 2017
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CNN painting a powerful person who doesn’t bow to left as evil? No way !
 
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Lupingosei

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There is a lot of problems in this.

As already said, this is not a secret. Second according every car maker Tesla is at least 4 years ahead of the competition and even VW and all the other competitors can't build cars like Tesla. They are still in the old system, so VW is neither developing batteries (Bosch is/was doing that) not the electric motors (also still Bosch). VW is changing this and wants to build it themselves (engines they are already on their way), but for the batteries they are still in the testing phase.

Tesla is building their cars more like a software company, so they can update or change things fast. They also did that at Space X. That is why it is a lot harder for the old fashioned car manufacturers to keep up. They have external partners and don't develop and design all themselves like Tesla does.

This was a good system, but with self driving cars and electric vehicles this may be a thing of the past. So it will not change a lot of VW or GM just put out more EV cars.
 
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Tschumi

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Elon Musk Weed GIF


Smooth moves Elon san
 

Dr.Guru of Peru

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Jun 10, 2004
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The more interesting thing in that story, that's also not a secret but generally gets overlooked, is that Tesla may no longer be the leading EV marque in Europe.
 
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Quasicat

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Aug 8, 2019
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Wait until you hear that Mcdonalds is in the real estate business and not selling burgers.
Yep, and Little Caesar’s loses money on its pizza, but makes their money as a pizza ingredient distribution company.

More on topic: GM is starting its battery production and will be making the internal combustion engine extinct by 2035, at least on their end. I’m looking at Hyundai and what they can do after test driving the EV Kona last year. The dealer said that they can test drive them for select customers, but not sell them outside of California yet.
 

INC

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Jan 8, 2018
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I thought it was money he invested in, from hair transplant clinics, well judging by his fake hair anyway